Order to CA$H

Nothing is more exciting than when that signed sales order returns from the customer. Gongs are rung; KPIs or metrics spreadsheets are updated; sales start calculating what that paycheck looks like. But what happens after that? How does that signed sales order translate into cash in the company’s bank?  This can be a critical process for a company, and when done well can help bolster the company’s cash flow and accelerate company growth. However, if mismanaged, it could create a proverbial leaky roof that creates headaches and distractions.

A solid order to cash (or, as the cool kids call it, O2C) process can be tricky to perfect in a early stage, growing company. If too few people are involved , you run into single point of failure or capacity related delays in billings. If too many people are involved, you might run into data fragmentation or too many chances to miss a handoff.  A delay, error, or misunderstanding of the process could yield a wide range of problems including:

 

  • Miscommunication to key stakeholders. This is especially true if you don’t have a solid grasp of the difference between bookings vs. billings vs. revenue. The booking occurs when you close the deal, but if you slip with the billing of the customer, you’ll never recognize the revenue. And key stakeholders (read: investors) really care about actual revenue over an inflated KPI dashboard.
  • Frustrated Sales team. When your sales team busts their ass to close a deal, the last thing you want to do is make them wait an eternity to get that commission (note, I’m making a hopeful assumption you pay commissions only once customers pay first…). Every day that passes without the customer paying, the probability of sales distraction increases. Often times you end up with a sales team member tracking down late payments. While this may be necessary, if they are doing this, it means they are not able to do their main job: SELL.
  • Cash flow constraints. This may be the most obvious, yet most important headache. If you are constantly struggling to get customers to pay timely, it’s almost like a double whammy: they are using your product (which costs your company money to run) but you aren’t getting the resources from them needed to pay those bills. Here’s an even worse scenario: what if you make a significant purchase decision based on the *expected* cash from a new customer but then struggle to get the cash in the door? It could be a very costly mistake for your business.

But fear not. You can avoid most of these problems with just a little bit of effort and organization. Here are a few of my suggestions to improve your O2C process:

 

  • Well organized CRM – A well organized CRM with dedicated fields for customer contract and/or billing info (i.e. billing date, billing amount, contract type, payment method) goes a long way when reconciling what should have been billed vs. what has been billed. Being able to run a quick report to compare against your billing system makes the monthly reconciliation process much smoother.
  • Accept credit cards and be cool with the fees. Some people prefer to be paid via check or ACH to avoid the ~3% credit card fee haircut. In the early days when you need that cash ASAP, the 3% fee is well worth the speed to get the cash in the door. Waiting for someone to pay via check or ACH is entirely out of your hands and you’d be amazed at how easy it is to forget to pay a vendor. I know because I’ve had my fair share of forgets….   🙂
  • Invest in a good billing software – Find a software that makes it easy to take people’s money. This seems like a “duh” statement, but you’d be surprised at how confusing or deficient some billing software can be. I’ve used Chargify and Recurly before (both use Stripe as the actual backend payment processor), and while I haven’t found the perfect billing software, they work well for me now. **Note, I’m assuming the use of credit cards to accept payment here.
  • Integrate billing links into the Sales Order. This may be my favorite one. Chargify and Recurly allow you to create a link for each of your products and/or subscriptions to share with customers in order to capture their billing info. If you make this a required field in the Sales Order, you’ll have arguably the most important step in the O2C process completed the minute the sale closes!

 

At the end of the day, your bookings are great but cash is king. If you take the time to focus on the process to ensure those bookings turn into cash as fast as possible, then one day you’ll be swimming in a pool of gold coins just like Scrooge McDuck.

scrooge-mcduck-swimming-in-money

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